Dallas Sign Ban - Backgrounder

Litigation Backgrounder

Law Makes It Nearly Impossible For Entrepreneurs to Advertise

The Issue in a Nutshell:

Businesses have a First Amendment right to communicate truthful information. Almost no government would dare to pass a law that restricted the ability of businesses to honestly advertise their products and services in newspapers, on the radio or on television. Yet local regulation of window signage has expanded, over the past 30 years, to unprecedented levels—levels that violate the First Amendment.

The city of Dallas, Texas, changed its laws in 2008 to ban virtually all business window signage. Yet it is not the government’s place to demand, as Dallas does, that shop owners keep ads off the top two-thirds of their window or demand that 85 percent of a window be free from ads. The government’s job is to protect the rights of business owners, including their right to free speech. Dallas’s ordinance does nothing but create problems for small businesses and stifle honest enterprise, which are the last things anybody should be doing in this economy.

A message that would enjoy almost complete constitutional protection in a newspaper enjoys, according to Dallas and other cities across the country, virtually no protection when hung in a window. Commercial speech deserves the same constitutional protection as political or artistic speech. The First Amendment guarantees that Americans may speak their minds and communicate information without having to get the approval of government censors.

Customers don’t notice tiny signs or signs at their feet. But the Dallas sign ordinance tells storeowners those are the only kinds of speech they can hang in their windows. A tiny sign in the bottom corner of a window is not effective; which is why businesses do not typically use tiny signs at people’s feet to attract customers.

If you can speak and advertise, you can stay in business. The city’s censorship falls hardest on small businesses, for whom retail signs are the most cost-effective way—and often the only way—to reach customers with news about products, services and specials. This free flow of information in the marketplace is just as important as the free flow of information in the marketplace of ideas.

The ordinance only applies to commercial signs. Business owners are free to cover their windows completely with political posters, artwork, shelves, coolers or even black paint, but they can’t cover them with commercial messages, such as “open” signs or signs about weekly specials. They can put a gigantic Dallas Cowboys sign on the top two-thirds of their window, but they can’t advertise in that same space that they sell Dallas Cowboys merchandise.

The Institute for Justice Texas Chapter is challenging this blatant violation of the First Amendment rights of Dallas business owners with a lawsuit filed in federal court. The Institute is asking a federal judge to declare the ban unconstitutional, and to restore the right of Dallas business owners to speak truthfully to their customers through messages in their windows.

Introduction

In 2008, the city of Dallas passed a new ordinance targeting window signage in area businesses.[1] At the time, the ordinance was billed as a way to improve the aesthetics of Dallas neighborhoods. “These signs just trash up the community,” said Dallas Mayor Pro Tem Dwaine Caraway.[2] But the new law, which was sold as an effort to clean up working class communities, actually represented a radical infringement on business owners’ First Amendment right to communicate truthful information to customers.

The Dallas ordinance requires that the top two-thirds of all windows be free of commercial signage and that signs not cover more than 15 percent of any window.[3] The ordinance only targets commercial speech. Other types of speech—such as political or artistic speech—are allowed.[4] These severe restrictions on window signage make it almost impossible for small businesses to tell customers about the products, services and prices they’re offering inside. The disconnect between the law’s publicly stated purpose and its effect—a campaign that targets even basic signs in well-kept businesses—demonstrates the inherently corrosive effect of laws that restrict freedom of speech for any reason.

Just as the government cannot restrict the number of advertisements that can run in a newspaper or the times during which television stations can advertise, the government cannot legally stop storeowners from truthfully communicating commercial messages to consumers on the top two-thirds of their windows.

Preliminary data from the city shows that enforcement has primarily targeted lower-income areas of town and the businesses that serve them.[5] There are exceptions, but most of the businesses that have been visited by city enforcers are immigrant-owned and very small. Larger, higher-profile businesses have been allowed to keep their signs, even though they plainly violate the letter of the law. The result is a climate of uncertainty regarding the law and the city’s future enforcement of it. The answer to the problem the city has created, however, is not to enforce this unconstitutional law on all businesses, but rather to do away with the restrictions and allow all businesses to reach out to their customers without the heavy hand of government getting in the way.

Signs are critically important to small businesses. Unlike larger companies, they have no way to communicate with customers and potential customers except through signs hung on the walls and windows of their buildings. The First Amendment protects the right of businesses to convey truthful information to their customers.[6] Although the U.S. Supreme Court has allowed municipalities to impose some limits on billboards and other signs that can theoretically impact traffic safety[7], the Court has never allowed restrictions as sweeping as those adopted by Dallas.

Under the new ordinance, businesses are limited to a tiny sign (covering only 15 percent of a window) in the bottom one-third of a window to convey information to potential customers.[8] For businesses whose windows start at the ground, that means locating a message between a customer’s feet, where its message is unlikely to be noticed or absorbed. It means that what signs you do get to keep are blocked whenever a car parks in front of your business. For businesses with small windows, it means posting tiny signs. For all businesses, it means a dramatic curtailment of their ability to speak to potential customers about the goods and services offered inside.

Indeed, Dallas’ law challenges the very idea that commercial speech enjoys any protection at all under the First Amendment. Although the U.S. Supreme Court has struggled to decide on the appropriate standard of review in free speech cases, the Court continues to recognize that commercial speech enjoys substantial protection under the First Amendment.[9] Dallas’ ordinance flies in the face of this trend with its unconstitutional restriction on basic, truthful window signage.

The Plaintiffs—Entrepreneurs Trying to Make it in Tough Times

April Gilliland owns FASTSIGNS on Central Expressway. April makes signs for a living. She uses her own business to show what she can do for customers. Yet, her tasteful, attractive signs violate the letter of the Dallas ordinance. On top of that, she has lost business after telling customers that she cannot make a particular sign for them because it would violate the Dallas ordinance. “It’s very frustrating,” said April. “Communicating with people through signs in your windows is essential to the survival of many small businesses. They are heartbroken when I tell them they can’t put even a tasteful, attractive sign up.”

Jaine London owns TK Scrubs, a nursing uniform supply store on Plano Road. “It’s hard out there right now,” Jaine said. “How are customers supposed to know what products I sell unless I can put signs in my windows to advertise?”

Charlie Patel owns Lakeside Cleaners, which has four locations throughout Dallas. City enforces targeted Lakeside Cleaners’ Knox-Henderson store, making Charlie take down a large sign that advertised “20% Off Dry Cleaning.” The impact was immediately noticeable, Charlie said: “People drove up, saw that the sign was gone and drove away. I watched this happen over and over.”

April, Jaine and Charlie are joined by Dena McDonald, who owns Tiki Trips, a travel agency on McKinney Avenue; and Jeff Youngblood, owner of an Irving FASTSIGNS franchise who frequently works with Dallas businesses.

Jaine, Dena and Charlie all agree that being unable to put effective signs on their stores has significantly impacted their ability to attract and retain customers in this difficult economy. These three entrepreneurs are representative of the hundreds of other businesses that Dallas enforcers have visited since the new ordinance went into effect.

April and Jeff have seen the effect of the new law both on their own businesses, and on customers they would like to serve. “We’re talking about basic, basic speech here,” says Jeff. “All these businesses want to do is communicate a simple message to people who might be interested.”

Some business owners are unwilling to challenge the new law even though it has had a negative impact on their bottom line. These individuals expressed a specific fear of city enforcers and a desire to remain on the “good side” of the Dallas Police Department. That is no way for Americans to live and do business. The brave individuals who have come forward will—if successful—be doing a service to their competitors and fellow entrepreneurs throughout the city by vindicating their right to speak to customers and potential customers. Even if this law had no negative economic impact on these small businesses, it is just plain wrong: In the United States, the government has no place imposing arbitrary restrictions of the free speech of small businesses. This kind of big government bullying must stop and will stop if this case is successful.

Sign Codes Quash Commercial Speech

Unlike large companies, most small businesses cannot afford to advertise in newspapers or on television or radio to attract customers. Aside from creating a website or placing a small ad in a local phonebook, most small businesses rely on window signage to let potential customers know the products, services and prices they offer inside.

This is especially true for the kinds of businesses Dallas has been targeting for enforcement of its new sign code. For instance, most convenience stores sell similar products. Thus, if one store wants to differentiate itself from its competitors, it must do so on the basis of price. To attract customers, these stores will frequently advertise their prices and sales on their windows. Potential customers see the attractive prices and decide to shop there.

Without the ability to tell potential customers about prices, sales and specials, a dry cleaner, such as Lakeside Cleaners, has no way of differentiating itself from its competition or attracting new business.

The ordinance is content-based, targeting only commercial speech. Other types of speech, such as political or artistic speech, are allowed.[10] Businesses remain free to put up Dallas Cowboys signs, signs supporting political candidates, or even murals and other art—the rules only apply to signs that convey a commercial message. This is clearly at odds with Dallas’s stated purpose of improving aesthetics. After all, political signs are just as likely as commercial signs to feature bold colors and strong messages, and art is often controversial or confrontational. Commercial signs, by comparison, intentionally try to be pleasing to the eye.

What this disparity really demonstrates is that the city understands that political and artistic speech enjoy broad First Amendment protection. But the Institute for Justice Texas Chapter intends to demonstrate that the right of a business owner to communicate accurate information to customers is an essential speech right in everyday life and it, too, is protected by the First Amendment. The ability to attract customers and convey information about prices and services is crucial to the daily survival of small businesses. Without it, they are rendered mute and may soon find themselves out of business.

Picking on the Little Guy

Information obtained through open records requests shows that Dallas has been highly selective in its enforcement of the new ordinance.[11] Overwhelmingly, the businesses that have been visited by city code enforcers are small, immigrant-owned businesses that cater to a working-class clientele. Harry Hines Avenue has been the hardest hit, with more than 85 warnings issued to the import/export businesses that line the boulevard.[12] The owner of one Western wear store on Harry Hines said that Dallas made him take down $8,000 worth of vinyl signs from his windows and throw them in the garbage. Ironically, the windows are still covered with graphics—but all the words and pictures have been removed.

Maple Avenue has also seen its share of aggressive enforcement.[13] Dallas’s targeted enforcement activity is clearly visible on the adjacent map, where businesses that have received citations are shown with blue marks.

Dallas’ records show that little to no enforcement activity has taken place in more affluent parts of town—despite the fact that businesses in these areas clearly violate the ordinance. Again, the answer is not to make all of the businesses across Dallas equally miserable under rigorous enforcement of this unconstitutional ordinance, but, rather, to remove this ordinance entirely, thereby freeing all of these small businesses to earn an honest living.

Sign Codes Spin Out of Control

Dallas is not the only city to have a sign code that violates the First Amendment. Although Dallas’ is one of the worst, dozens of other Texas cities have similar restrictions. Fort Worth limits signs to 10 percent of each side (façade) of a building.[14] San Antonio, like Dallas, limits signs to 15 percent of a window (or 25 percent with a permit).[15] Frisco limits signage to 25 percent of a window and, somewhat unusually, only allows one sign per window.[16] These examples are just the tip of the iceberg. Sign codes like Dallas’ are spreading rapidly across Texas and the nation.

Most of these ordinances have been enacted within the past three years. They reflect a growing trend among Texas municipalities to drastically limit the amount of commercial speech that businesses can place in their windows.

Legal Challenge

The First Amendment to the U.S. Constitution states that “Congress shall make no law . . . abridging the freedom of speech.”[17] Like the rest of the Bill of Rights, the First Amendment applies equally to the states and to their political subdivisions, including cities.[18] The right to free speech is among the most fundamental rights that Americans enjoy. Speech can take different forms, including political speech, artistic speech and—as in this case—commercial speech. Most laws that regulate free speech will be treated by courts with a standard called “strict scrutiny,” meaning that the government must demonstrate an extreme need to regulate the speech in question.[19]

The current standard of judicial review for commercial speech is somewhat unsettled, although it is generally afforded less protection than other favored speech. Justice Thomas famously noted, “I do not see a philosophical or historical basis for asserting that ‘commercial’ speech is of lower value than ‘noncommercial’ speech. Indeed, some historical materials suggest to the contrary . . . . Nor to I believe that the only explanations the Court has ever advanced for treating ‘commercial’ speech differently from other speech can justify restricting ‘commercial’ speech in order to keep information from legal purchasers so as to thwart what would otherwise be their choices in the marketplace.”[20]

This lawsuit challenges three aspects of the new law. First, the law unconstitutionally prohibits signs in the upper two-thirds of any window or glass door.[21] This irrational restriction serves no discernable purpose, other than to force business owners to locate signs at people’s feet. Second, the law unconstitutionally restricts signs to no more than 15 percent of any window or glass door.[22] For small windows, that renders the signs practically invisible. Even for larger windows, 15 percent may represent an area no larger than an average single sheet of paper. Third, the ordinance prohibits signs that cover more than 25 percent of the building façade (everything except windows).[23] These restrictions make it almost impossible for a business to both comply with the law and advertise effectively to customers and potential customers.

The federal courts that will hear this case will apply a test developed by the U.S. Supreme Court that is unique to commercial speech.[24] The first element of the test is a determination of whether the speech concerns a lawful activity and is non-misleading.[25] The type of signs that Dallas has banned, such as “30% Off on Wednesdays,” clearly satisfy this requirement.

The second element looks at whether the asserted governmental interest is “substantial.”[26] According to news accounts, Dallas is justifying the ban on primarily aesthetic grounds—meaning that it has outlawed the signs because it does not like the way they look.[27] The city is on shaky legal ground in this assertion—a city’s aesthetic concerns about basic window signage are slight. Dallas’ second justification is that police need to be able to see inside of businesses to determine whether they are being robbed.[28] Police enforcement activities may be an important government function, but, as will be shown below, this justification is absurd because only commercial signs are prohibited in windows—nearly any other kind of obstruction is perfectly legal under the ordinance.

The government’s second rationale, that police need to be able to see inside of businesses, is completely undermined by two facts: first, businesses are not required to have windows at all and second, only commercial signs are banned. Businesses can block a window with anything they want—except a commercial message. They can paint their windows black, cover them with blinds to keep out the sun or put coolers in front of them. It is therefore absurd to say that this regulation advances a police safety interest when businesses are free to block their windows in any other way.

The third element of the test asks whether the regulations “directly advance” the asserted interest.[29] Dallas argues that the ordinance is necessary to prevent crime—yet it only targets commercial speech. Windows can still be blocked by anything except a commercial message. Dallas also argues that fewer signs mean nicer-looking streets. Yet, the businesses it targets are largely in commercial areas where signs are the rule, not the exception. Fewer signs don’t make a business district look better—they make it look vacant, empty, and struggling. The signs Dallas is targeting are indicators of vitality.

The fourth and last element of the legal test is whether the regulation is “not more extensive than necessary” to advance the asserted government interest.[30] Here, the city’s asserted interests in aesthetics and police safety are very weak. Yet, the interest of these businesses in keeping signs in their windows is very strong. Banning 85 percent of window signs and forcing the remaining signs to be hung at people’s feet is an extreme solution to a non-existent problem. People can recognize that a “30% Off” sign hung in a dry cleaner’s window is part of the normal landscape of commerce in America. The city of Dallas has no business telling people they cannot communicate with customers in such a fundamental way.

Indeed, the new sign code actually has very little to do with aesthetics and nothing to do with police safety. It is a way for government enforcers to selectively and subjectively target politically powerless businesses that they, for whatever reason, simply do not like, while allowing most other businesses to flagrantly violate the law. The city’s aesthetic interest in prohibiting simple window signs is minimal, while the business owners’ interest in communicating to their customers is quite substantial. The law clearly violates the First Amendment right of business owners to convey truthful information through messages in their windows.

The Defendant

The defendant in this case is the city of Dallas, Texas.

The Litigation Team

The lead attorney in this case is Institute for Justice Texas Chapter Executive Director Matt Miller, who litigates under the Texas Constitution in the areas of economic liberty, free speech, property rights and school choice. He is joined in the litigation by Wesley Hottot, staff attorney at the Institute for Justice Texas Chapter. The Institute for Justice Texas Chapter is located in Austin, Texas.

The Institute for Justice: A History of Protecting Free Speech and Economic Liberty

The Institute for Justice litigates in support of constitutionally enshrined individual rights, including free speech. IJ’s headquarters and state chapters have scored significant victories on behalf of individuals and businesses throughout the nation. A few of these important speech victories include:

Swedenburg v. Kelly—The Institute for Justice successfully waged the nation’s leading legal battle to reestablish the American ideal of economic liberty when, on May 16, 2005, the U.S. Supreme Court struck down discriminatory laws that existed only to protect the monopoly power of large, politically connected liquor wholesalers. Vintner entrepreneurs Juanita Swedenburg and David Lucas joined wine consumers and IJ in filing this federal lawsuit as a challenge to the ban on direct interstate wine shipments in New York. The case raised issues of Internet commerce, free trade among the states, and regulations that hamper small businesses and the consumers they seek to serve.

ForSaleByOwner.com Corp. v. Zinnemann—Also in 2004, the Institute for Justice prevailed in persuading the U.S. District Court for the Eastern District of California to stop the state of California’s efforts to impose real estate broker licensing requirements on an informational website.

Wexler v. City of New Orleans—In 2003, the Institute for Justice successfully persuaded a federal court to strike down an absurd ordinance that prohibited booksellers from selling books on city sidewalks without a government issued permit.

Pagan v. Fruchey—In 2006, the Institute for Justice helped client Chris Pagan strike down a city ordinance that the city used to threaten him with a hefty fine and even jail time because he put a “for sale” sign in the window of his car. Glendale, Ohio, banned the words “for sale” from parked cars.

Ballen v. The City of Redmond—the Institute for Justice successfully defended the right of a small business owner to advertise his bagel shop using a portable sign after the city informed him only realtors and politicians could use such means of advertising.

The Institute for Justice

The Institute for Justice is a public interest law firm that advances a rule of law under which individuals can control their destinies as free and responsible members of society. Through litigation, communication, outreach and strategic research, IJ secures protection for individual liberty and extends the benefits of freedom to those whose full enjoyment is denied by the government.

The Institute for Justice Texas Chapter is located in Austin and litigates under the State and Federal constitutions to reinvigorate economic liberty, preserve property rights, promote educational choice and defend the free flow of information essential to politics and commerce.

The Institute for Justice is based in Arlington, Va. In addition to Texas, IJ has state chapters in Arizona, Washington and Minnesota, as well as the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School.